Türkiye's economy grew 3% year-over-year in the fourth quarter of 2024, taking full-year growth to 3.2%, driven primarily by domestic demand, official data showed on Friday, surpassing forecasts despite the weight of high interest rates.
The data also suggested that Türkiye, which experienced a technical recession as of the third quarter of 2024 due to two consecutive contractions, returned to positive quarterly gross domestic product (GDP) growth in last year's final quarter.
The government, which had initially projected 3.5% growth for 2024, had trimmed its expectations to reflect ongoing adjustments in domestic demand and efforts to slow down annual inflation, which exceeded 75% in May and is now just over 40%.
Treasury and Finance Minister Mehmet Şimşek said balanced growth was achieved in 2024 with the contribution of 2.1 points from domestic demand and 1.1 points from net foreign demand.
"More favourable financial conditions in line with disinflation, increased predictability with our policies and improved confidence will positively affect economic activity," he said in comments on the economic outlook.
Increased growth among Türkiye's trade partners, more supportive global financial conditions and moderate commodity price expectations will positively affect growth in 2025, but increasing protectionist policies in global trade and geopolitical developments are among the risk factors, he said.
The improvement in the last quarter was driven by a rebound in private consumption and robust investments, said analysts at Dutch banking giant ING.
Fourth-quarter GDP rose 1.7% from the previous three-month period on a seasonally and calendar-adjusted basis, the Turkish Statistical Institute (TurkStat) said.
That marked "a strong increase in momentum and marking the highest quarterly reading since the second quarte of 2023," ING analysts said.
The data "suggests that economic activity gained momentum, driven primarily by domestic demand, while the contribution of net exports turned negative again," they added.
The economy suffered a technical recession after successive drops in growth in the second and third quarters. TurkStat, meanwhile, revised the third quarter GDP expansion to 2.2% year-over-year from 2.1%.
GDP at current prices soared 63.5% to TL 43.4 trillion ($1.3 trillion) in 2024 compared to the previous year, the TurkStat said. GDP per capita reached TL 507,615 ($15,463) at current prices.
The upward trend can be attributed to a rebound in household consumption, which became positive after a negative reading in the previous quarter, and rising investments. The positive momentum persisted despite the negative impacts of inventory buildup and net exports.
The data revealed a 3.9% year-over-year growth in private consumption, boosting the headline GDP rate by 3 percentage points, even amidst tight financial conditions.
Investment appetite saw a 6.1% annual growth, adding 1.5 percentage points to GDP expansion. This was driven primarily by a continued rise in construction investments (9.7% year-over-year) and a rebound in machinery and equipment investments after two quarters of decline, supporting fourth-quarter investment growth.
Public consumption contributed positively to the headline GDP with a 1.6% year-over-year increase, adding 0.2 percentage points to the fourth-quarter growth figure.
However, inventory buildup reduced growth by 0.9 percentage points. Net exports also pulled the headline rate down by 0.8 percentage points, due to slower exports compared to positive import growth, after positive contributions in the first three quarters of 2024.
In the sectoral breakdown, construction emerged as the leading contributor, followed by industry and agriculture. The recovery in the construction sector, along with its increased contributions to headline GDP in recent quarters, can likely be attributed to rebuilding efforts in the earthquake-affected regions.
Surveys estimated the economy to have expanded 2.6% year-over-year in the fourth quarter and by 3% in 2024 as a whole.
Analysts said in the poll that growth remained fairly steady largely due to strong demand in some areas and some production trends, despite tight monetary policy.
Economists forecast 3.1% growth in 2025, the poll showed, reflecting the effect of a series of sharp interest rate hikes that started in mid-2023.
The central bank raised its benchmark rate by 4,150 basis points to cool inflation, bringing the rate to 50% in March 2024. The shift to more conventional policymaking, after years of low rates aimed at fostering growth, weighed on domestic demand.
After cuts of 250 basis points in both December and January, the rate is now 45%, and expected to fall to 30% by year-end.
Last year's growth put Türkiye, alongside Spain, among the fastest-growing Organization for Economic Cooperation and Development (OECD) economies whose data have been released.
Spain's growth matched Türkiye's 3.2% in 2024, followed by the U.S. with 2.8%, Lithuania with 2.7% and Norway with 2.1%.
Meanwhile, Austria's economy shrank 1% and Germany's contracted 0.2%, as of the latest growth data from OECD countries.
Among the G-20 nations, Indonesia had the fastest-growing economy with just over 5% growth in 2024, followed by China with 5% and Russia with 4.1%.
India is yet to announce the full-year growth, which is expected to place it at the top, with Türkiye and Spain rounding the top five economies.
Data on Friday showed India's economy expanded 6.2% in the December quarter. It slightly revised upwards its growth projection for the fiscal year through March 2025 to 6.5%, from an earlier forecast of 6.4%.
